1991 (1) TMI 242 - AT - Income Tax

Tribunal affirms tax on locker rent & capital gains, denies exemptions under sections 80P(2)(a)(i) & 80P(2)(c)(ii)

Shri Mahavir Co-operative Bank Limited. Versus Income-Tax Officer.

The Tribunal upheld the taxability of income from locker rent and capital gains from the sale of immovable property. It corrected the calculation of ... Immovable Property, Movable Property Issues Involved:1. Taxability of income from locker rent.2. Taxability of capital gains from the sale of immovable property acquired in satisfaction of a loan.3. Correct calculation of capital gains.4. Eligibility for exemptions under section 80P(2)(a)(i) and section 80P(2)(c)(ii).Detailed Analysis:1. Taxability of Income from Locker Rent:The assessee contended that the income from locker rent should be exempt as it is part of the banking business under section 80P(2)(a)(i). The Income Tax Officer (ITO) and the Commissioner treated Rs. 3,218 from locker rent as taxable income, considering it as income from house property. The Tribunal noted that the Madhya Pradesh High Court in the case of Bhopal Co-operative Central Bank v. CIT observed that income from locker rent did not appear to be co-related to any of the activities mentioned in the definition of banking under the Banking Regulation Act. Thus, the Tribunal upheld the taxability of the locker rent income.2. Taxability of Capital Gains from the Sale of Immovable Property:The assessee acquired an immovable property in 1976 in satisfaction of a debt and sold it in 1982, resulting in a profit taxed as capital gains by the ITO. The assessee claimed exemption under section 80P(2)(a)(i), arguing that the property was stock-in-trade and not a capital asset. The Tribunal examined various case laws, including CIT v. Nainital Bank Ltd., Patiala State Bank, In re., A.H. Wadia v. CIT, and Coimbatore Anupparpalayam Bank Ltd. v. CIT. The Tribunal concluded that the property was treated as a capital asset by the assessee, as evidenced by the depreciation claimed and the resolution to acquire the property permanently. Therefore, the capital gains from the sale of the property were not considered income from banking activities and were taxable.3. Correct Calculation of Capital Gains:The assessee argued that the correct amount of capital gains should be Rs. 75,900 instead of Rs. 96,158 as computed by the ITO. The departmental representative did not contest this position. The Tribunal accepted the assessee's calculation and held that the correct amount of capital gains to be taxed was Rs. 75,900.4. Eligibility for Exemptions under Section 80P(2)(a)(i) and Section 80P(2)(c)(ii):The Tribunal analyzed the scope of section 80P(2), which provides exemptions for income attributable to the business of banking. The Tribunal referred to the Supreme Court decision in Cambay Electric Supply Industrial Co. Ltd. v. CIT, which stated that the expression 'attributable to' is wider than 'derived from.' However, the Tribunal emphasized that the definition of banking under the Banking Regulation Act is limited to money-lending and related activities. The Tribunal concluded that acquiring and selling immovable property is not a banking activity and does not qualify for exemption under section 80P(2)(a)(i). The Tribunal also noted that the exemption under section 80P(2)(c)(ii) was not applicable as the income was not derived from any activity other than banking.Conclusion:The Tribunal upheld the taxability of income from locker rent and capital gains from the sale of immovable property. It corrected the calculation of capital gains to Rs. 75,900 and denied exemptions under section 80P(2)(a)(i) and section 80P(2)(c)(ii), concluding that the income in question was not attributable to banking activities as defined under the Banking Regulation Act.